New ways to weaken pay and conditions

Chris Oxlade - Crawley Borough Council (Ifield)

Published:07:23Saturday 24 January 2015

In recent years zero-hour contracts and the fight for a living wage have highlighted the national decline in pay and working conditions.

Despite corporate profitability excluding oil and financial services being at a 16-year high, companies are finding new ways to weaken pay and conditions. In Crawley one approach is particularly relevant, umbrella companies.

Traditionally employment may have looked something like this: you’re hired to do a job, you do that job and get paid, the company passes the tax owed to the government and honours your legal rights to sick leave and holiday pay.

Some employers previously got around these obligations by classifying people as self-employed, but following a change in the rules which banned this approach, increasing numbers are using umbrella companies to the same effect.

Umbrella companies force employees to pay both their own and their employers’ NI contributions. Through setting base pay at the minimum wage and topping up with expenses and performance related pay they further avoid taxation and by rolling up holiday pay with base pay they effectively deprive employees of their entitlement to annual leave. Umbrella companies even charge workers for their services, with fees reaching £30 a week.

While construction has so far borne the brunt of umbrella companies, this approach is increasingly found in industries employing almost 25% of Crawley’s working residents.

Following pressure from Labour MPs and unions, the Autumn Statement did include an announcement on tackling the expenses tax loophole. Yet, while this helps the Treasury to get their share in tax it does nothing to help those actually stuck on these contracts.

The skills shortage in construction affects us all and poor working conditions don’t help in attracting young people into the industry. If this shortage isn’t tackled the result will either be a cap on economic growth or increasing immigration to meet the sector’s needs.

Attempts to weaken working conditions in construction is a national problem and the Welsh Government recently confirmed they will ban umbrella companies on all of their construction projects. Action is now needed to support those affected across the rest of the UK.